Down To Business: The Sky Isn't Falling When It Comes To U.S. Broadband

We have a way to go still, and much to prove, especially in wireless, but the free market is producing considerable advances.

We have a tendency as a country to measure our economic well being in World Almanac terms. We take pride in the fact that the United States ranks at or near the top globally in gross domestic product, exports, research, patents, and almost every other gauge of industrial might. But when it comes to broadband telecom infrastructure, we lapse into an inferiority complex, as the stats suggest we're "falling behind" other fat-wired economies.

Rankings released in April by the Organization for Economic Cooperation and Development put the United States 15th among industrialized countries in the percentage of people with high-speed connectivity, a factoid presidential candidates and special interests have used in calling for a national broadband telecom policy. A recent report commissioned by the Communications Workers of America piles on, maintaining that the median U.S. Internet download speed is about 2 Mbps, compared with 61 Mbps in Japan, 45 Mbps in South Korea, and 17 Mbps in France. "High-speed networks are the infrastructure of the 21st century, and the U.S. needs a national policy to get all of us there," said CWA president Larry Cohen, ever-cognizant of the many union jobs such a government-orchestrated program would create.

It is this kind of posturing that's causing much of the angst over the FCC's auction of 700-MHz spectrum, considered one of the last great opportunities to build a nationwide broadband network alternative to DSL and cable. The FCC last week approved rules for the January auction that would require licensees to make their networks accessible to any phone, device, or application--the more "open" approach pushed by Google and others. In the run-up to the FCC's decision, Commissioner Michael J. Copps reflected on the many studies that show U.S. broadband impotence. "The 700-MHz auction could help turn this around," Copps wrote. "If we get it right, this auction offers the prospect of new competition, innovation, and consumer choice."

Fantastic that policy makers are taking the long view, but the U.S. broadband landscape isn't as bleak as some pundits and politicos make it out to be. As Scott Wallsten of the Progress and Freedom Foundation noted in recent Senate testimony, those OECD and other international rankings provide little insight into broadband demand in each country, so they don't necessarily identify "market failures." While last-mile connectivity is still insufficient in the United States in places, there's also such a thing as broadband oversupply, as the telecom bust of several years ago showed.

In any event, major U.S. carriers are expected to spend $70 billion this year to upgrade their networks, and not just on DSL. Verizon, for example, said last September that it plans to spend $18 billion on its FiOS fiber-to-the-home rollout from 2004 through 2010, at which time it expects to have 7 million customers. Cable companies, which spent $12.4 billion on infrastructure in 2006, already pass 119 million homes with high-speed data services, according to researcher SNL Kagan.

On the wireless front, the auction of the 700-MHz bands, which let signals travel farther than they do with current wireless services, should lower the cost of rolling out broadband to remote locations. And at least a year before those services go live in 2010, Sprint Nextel and Clearwire should be offering wireless data services of between 2 Mbps and 4 Mbps, mostly in metro areas, over a separate WiMax network.

Meantime, the percentage of Americans with broadband access rose to 47% in February, compared with 42% in early 2006 and 30% in early 2005, according to a survey by the Pew Internet & American Life Project. As for the "digital divide," 30% of adults in households with annual incomes of less than $30,000 report having broadband, up 9 percentage points from 2006, while 31% of those living in rural areas have broadband, up 6 percentage points from 2006.

We have a ways to go still, and much to prove, especially in wireless broadband. But the free market is already producing considerable advances.

While 68% say demand for WAN bandwidth will increase, just 15% are in the process of bringing new services or more capacity online now. For 26%, cost is the problem. Enter vendors from Aryaka to Cisco to Pertino, all looking to use cloud to transform how IT delivers wide-area connectivity.

Worries about subpar networks tanking unified communications programs could be valid: Thirty-one percent of respondents have rolled capabilities out to less than 10% of users vs. 21% delivering UC to 76% or more. Is low uptake a result of strained infrastructures delivering poor performance?